I’m getting ready to move, and I am using the opportunity to clean out a lot of my files. Are there any general rules I should be following when it comes to financial paperwork and tax documents?
We completely understand the urge to declutter your office, especially on the verge of a big move. While there are few hard and fast rules, there are some guidelines we urge all of our clients to keep in mind as they organize and maintain their personal and business records.

For individuals and families
You should retain any records that support items shown on your individual tax return until the statute of limitations runs , which, in most cases, is three years from the date you filed your return. With this in mind, you can probably toss most documents related to your 2014 tax return, assuming you filed by the April of 2015.

In some cases, the statute of limitations is longer. If you understated your adjusted gross income by more than 25%, for example, the limitations period is six years. The statute of limitations does not begin until you file a tax return. It may be wise to keep your records for the full six years so you can defend against any charges of gross understatements.

You can also file an amended return on Form 1040X during the general three-year statute of limitations period if you missed a deduction, overlooked a credit or misreported income.

These are our recommendations:

Tax returns. We urge our clients to hold on to copies of their tax returns indefinitely. Should the need arise, you will be able to prove to the IRS that you filed. At the very least, hang on to them for six years after they are due or filed.

Real estate records. Keep these records for as long as you own the property, plus three years after you dispose of it and the transaction is reported on your tax return. Retain receipts for home improvements, relevant insurance claims and any refinancing documents. These help prove your adjusted basis in the property, which is needed to determine the taxable gain at the time of sale of a personal residence, or to support calculations for rental property or home office deductions, should you be claiming those on a return.

Traditional and Roth IRAs. The IRS requires you to maintain records of your basis in your IRA accounts until all the money is withdrawn from your IRA accounts. In most cases, that basis is tracked on Form 8606. For Roth IRAs, retain all records pertaining to contributions and withdrawals. If an account is closed, treat IRA records the same as records for stocks and bonds. Don’t dispose of any ownership documentation until the statute of limitations expires.

Stocks and bonds. To report taxable events involving stocks and bonds, retain detailed records of purchases and sales. These records should include dates, quantities, prices, dividend reinvestments and investment expenses, such as broker fees. You should keep to these records for as long as you own the investments, plus the three-year statute of limitations for the relevant tax returns.

When in doubt, keep it
It’s easy to accumulate a mountain of paperwork from years’ worth of tax and financial records (though you may consider securely digitizing your records to save space). If you are unsure whether you should retain a document, a good rule of thumb is to hold on to it for at least six years or, for property, at least three years after the tax return reporting its disposition is filed.

Tom Cooney and Crystal Faulkner are partners with MCM CPAs & Advisors, a CPA and advisory firm offering expert guidance and beyond the bottom line thinking for today’s public and private businesses large and small, not-for-profits, governmental entities and individuals. For additional information, call 513-768-6796 or visit us online at www.mcmcpa.com.